Osisko Mining Puts Early Losses Behind It to Dig Out Small Gain; Credit Suisse Initiates coverage with Outperform
Osisko Mining (OSK.TO) has put an early dip down to 11.68 behind it to dig out a small gain as Credit Suisse initiated coverage on the stock with an Outperform rating and $15 target price.
"We believe Osisko is on target for starting production of Canadian Malartic in Q2/2011, where we are forecasting the mine to produce an average of 607,000 ounces at an average cash cost of $374/oz. As our forecasted cash cost is 17% above Osisko's guidance of $319/oz, upside to our forecasted cash flow, and hence valuation, is possible," the brokerage said in a morning note.
"Experience gained from developing Canadian Malartic, combined with our expectations of strong cash flow, should give Osisko the resources it needs to advance its Hammond Reef gold project, where are forecasting a 2015 start-up, with annual production of 344 koz at an average cost of $503/oz. By 2016, we estimate Osisko will be producing more than 1 Moz of gold.
"Stable mining jurisdictions help make Osisko an attractive investment, and a possible takeover candidate. With the Malartic project fully financed, and construction well underway, Osisko could be viewed as a low risk acquisition opportunity. Once production begins and operating risk is further reduced, we expect the valuation gap between Osisko and its larger cap peers to erode. Goldcorp Inc. currently owns about ~10% of Osisko's common equity.
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